Clause 92 - Penalties for contravention of conditions
Communications Bill
11:00 am
Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)
The regulator currently has no power to impose fines for licence breaches under the regime in the Telecommunications Act 1984. The Director General of Telecommunications can direct that a licensee amend its behaviour, but that is all that he can do. However, the power for regulators to impose penalties for breaches of regulatory obligations has become a much more common and widespread feature of UK regulation than it was in 1984. In many overseas jurisdictions, notably the USA, it has been an important feature for a much longer period.
General competition law under EU and UK regimes allows for fines. The rationale is, essentially, that since we are in the main dealing with economic and commercial regulation and there may often be a commercial gain in breaking the rules, an economic sanction provides an effective deterrent against breaking the rules and a fair penalty for doing so. The hon. Gentleman suggested that that was inconsistent with what happens elsewhere, but that is not so—a celebrated example is Ofgem's fine of some £2 million against London Electricity for repeated mis-selling of energy services. An ability to impose fines is a common feature of UK economic regulatory regimes. Our view is that it should be in place for the telecommunications sector as well.
If Ofcom were not given the power to impose financial penalties, it could ultimately be forced to apply more rigorous controls on a provider's business—perhaps even to the extent, in the event of further contraventions, of restricting or entirely suspending their entitlement, since that would be the only means by which it could ensure compliance. In our view, such measures should be reserved for the most serious cases. Part of our aim in the Bill is to ensure that we do not discourage the development of competition and consumer choice, or unnecessarily restrict choice.
Ofcom's powers are subject to safeguards and controls. Ofcom will have to publish guidelines on the penalties, having first consulted the Secretary of State. Clause 93, which we are coming to, lays down rules for imposing and calculating penalties, and decisions on the imposition of penalties will be subject to the full right of appeal to the Competition Appeal Tribunal.